ORCL Analysis

Oracle Corp. (ORCL)

Update 4/7/2017: ORCL gapped sharply to the upside immediately after earnings were published and then began a rapid decline. I exited the position at 24.7% of maximum potential profit, close to my target price.

Shares showed a net rise of 2.6% over 23 days, or a +41% annual rate. The options position produced a +32.8% yield on debit for a +520% annual rate


ORCL publishes earnings on Wednesday after the closing bell.

I shall use the APR series of options, which trades for the last time 37 days hence, on April 21.

Implied volatility stands at 20%, which is 1.8 times the VIX, a measure of the volatility of the S&P 500 index.

ORCL’s IV stands in the 36th percentile of its annual range and the 46th percentile of its most recent broad movement. Despite the fact that both metrics are below my standard, the 50th percentile, I’m proceeding with the analysis. IV is fluctuating within a narrow range and easily return to that level by the end of the day. In other words, I’m punting.

The price used for analysis was $42.89.

Premium: $1.54 Expire OTM  
ORCL – iron fly Strike Odds Delta
Long 45.00 82.0% 20
Break-even 44.54
Short 43.00 53.7% 49
Short 43.00 46.2% 51
Break-even 41.46
Long 40.00 83.3% 15

The premium is 62% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered a position on ORCL as described above. The stock at the time of entry was priced at $42.88.

By Tim Bovee, Portland, Oregon, March 15, 2017

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